Cash flow forecasting can show you the ups and downs in your events management business. If you want to know what action to take, this is one tool that can help
A few budgeting tips here and there might help you remain profitable in the long run. And they can even help you achieve success. But beyond the tips, one of the sure-fire ways for you to reach your goals is through cash flow forecasting.
This is a tool that gives you a pragmatic projection of where your business is heading. This then puts you in a smarter position to take action in whichever situation demands it.
Of course, it has some additional benefits, too.
A. It Builds Confidence
The cash flow forecast targets three particular entities – offering them visibility and demonstrating financial control. A good projection, albeit still rough, can build confidence in each of these stakeholder groups.
- Owners: Owners can see if they’re on track. If not, they’ll know when and how to take action.
- Banks: Banks may use a cash flow forecast to assess the liquidity of a business. The health of this forecast can be the difference between getting or not getting a loan.
- Investors: Investors can see the current standing of a company. A cash flow forecast may persuade them to put more funds in and help jumpstart new projects.
A cash flow forecast may even help you renegotiate your rates, thus improving your cash flow and financial stability.
B. It Helps You Make Better Decisions
Both good and bad decisions come from the top. As a leader, you want to make as many good decisions as you can regarding your business, yourself, and your team.
Before you take any action, it’s critical to know how money moves in your company. But here’s the thing – you can’t always rely on current or very recent data. Particularly with an events-based business.
Cash flow forecasting considers a lot more information from the past months and years. And the final report can give you a better idea of what’s going on with your business.
Right now, you may think that you’ve had a great three-month stretch.
But what if it’s an anomaly? Can you rely on the same numbers for the next quarter or the one after that?
Forecasting helps you gain much-needed perspective. At the same time, it forces you to think strategically about your next move.
The question is: Who Should Handle Your Cash Flow Forecasting?
Ideally, this is a job best left for a company’s CFO. But in a small business, other people can handle it.
If you have an accountant, they should be able to manage your cash flow and build a forecasting model.
And if you have finance experience, you can even do it on your own. That’s probably best since you’re already the one who has to put the information to good use.
As your business grows, you’ll want to assign the task of cash flow forecasting to your finance team.
Know Your Finances
In the events space, it’s critical to base your plans for the future on solid, reliable information. Taking the time to project your cash flow is an important tool to use to protect your business. If you see warning signs of falling cash flow, forecasting can help let you know what’s wrong and where to take action to prevent the same thing from happening again. Get in touch if you need help with your cash flow forecasting.